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Instill a few good personal financial habits in 2016
'Positive Change’ is synonymous with a New Year, and few resolutions will give you as much return on your investment as instilling a few good personal financial habits with your money. Below are 12 New Year’s financial resolutions, to help ensure that you have a more prosperous financial year ahead.
Why not aim to knock off at least one each month ? By the end of the year, you'll be on a much firmer financial footing.
1. Open an offshore bank account
If you are from country A and you live in country B, then you should bank in country C. There are an absolute multitude of benefits of banking offshore and our private banking team, voted Best Global Offshore Banking Team of 2014, can help advise on these. Why not download our free eBook, The Expat Guide to Offshore Banking, to find out why this is a great option for the expatriates.
Unexpected things happen all the time, perhaps even more so to those of us who reside outside the comfort of our home countries. Even millionaire pop stars need financial planning and should place ‘setting some cash aside’ high up on their financial ‘to do’ list. This fund should be equal to six months’ living expenses and kept to one side in an offshore bank account.
What are your life's dreams? This should be a fun exercise, but remember, if you don't plan to get somewhere, you're not likely to arrive. A great financial adviser will carry out cash-flow modelling with you, helping you set specific, quantifiable financial goals that answer questions like who, what, when, and where.
4. Make a Will
Writing a Will is one of the most common things on the never-ending ‘to-do’ list. Yet having a Will is important if you want to take care of your family, particularly in cases where there are ex-spouses and children from previous marriages. Not writing a Will can leave loved ones in chaos and distress. Exaptriates should consider writing a Will for each country they have assets in.
In an earlier blog post this year, we looked at the financial advice we gave our lottery winning clients, after their spending spiralled out of control. Often, expats use a currency that differs from the one that they use in their home country, which can also distort spending habits. Nevertheless, for your long-term financial well-being, it's vital that you figure out how much you're spending and on what you are spending your money on.
6. Pay off debt
The inappropriate use of debt is the quickest way to jeopardise your financial security. Use cash or a debit card for purchases, not a credit card. Pay off or consolidate personal debt to lower your interest charges. Look into refinancing mortgage debt or swapping variable rate debt to fixed rate if you haven't already. Interest rates have never been so low. Only this year HSBC launched their very low 0.99% UK mortgage rate.
This may not seem like rock ‘n’ roll at first, but once you get started on making regular savings, this can actually become enjoyable and is an important factor in funding your life goals.
8. Review your investment portfolio and develop a strategy
There's a lot of misconception surrounding investing. Many people lack a complete framework and context for making informed investments and tend to make common investment mistakes based on short-term, emotional investment decisions. Do yourself a favour and take some time to develop an investment strategy with a competent and unbiased international financial adviser.
9. Get serious about your retirement
People are living significantly longer, and state benefits are providing a shrinking portion of the future income people need into retirement. But retirement planning for expats need not be as difficult as it sounds. Contributing to your employer’s retirement or pension plan can be one of the best deals out there, assuming you get a tax deferral and employer contributions. If you don't have a company retirement plan, look at other tax-advantaged investment options.
10. Review your insurance coverage
Consider questions like: how much will your employer pay to your family in the event of your death? If you or your spouse set up life insurance in your home country, does it still cover you in the country in which you are now resident?
11. Get competent advice when you need it
Don't be ‘penny wise and pound foolish’. The complexity and sophistication of financial products has increased immensely. In today's world of specialisation, it is impossible to keep up with it all. You don't have to do it all yourself. It is often cheaper and more effective in the long run to get transparent, unbiased advice when you need it.
12. Simplify your financial affairs
Keep good records. Sort through your financial documents. Bin the ones that are no longer necessary (for example, Brtain's HM Revenue and Customs do not require you to maintain financial records for more than seven years) and put the remainder in some kind of order. Keep your financial life as simple as possible. It's easier to manage and you're more likely to keep up with it.
Make every effort to bid farewell to bad personal financial habits, inspire some good ones of your own, and get started on creating your own financial security with these new year's resolutions.
All the best for a prosperous New Year!
